Can anyone explain to me why one would buy an aircraft and incur a significant out of pocket cost rather than do an operational lease? I also noticed that the aircraft manufacturers give a higher discount on leased aircraft than purchased aircraft.
The only advantage that I have seen so far in owning an aircraft is that it lowers the interest cost of loans.
Are there any other advantage?
- Company value
- Possibility to take out higher loans
- Possibility to lease it out or sell it for a higher price
;D
Two main reasons.
First is that despite the one time massive outlay you save on leasing costs for the rest of the time that you have the aircraft. That can make you income a little bigger and is thought of by some to be vital in making smaller aircraft viable.
Second is that every owned aircraft's value is counted towards your company value which makes you look richer and, more importantly gives you access to larger loans.
I'm sure there are more.
I'd say the main reason is cost. A new 737-900 in MT3 costs $77 525 040 USD. The lease for the plane is $981 330 USD / month. So to cover the cost the purchase, you have to use the plane for 79 months, or 6 years and seven months. After that the lease will cost more than if you had bought the plane.
Of course, it's often better to lease the aircraft in order to get more at once, thus make more revenue, and that usually covers the diffrence between lease and buy. But, if you plan on keeping the aircraft for the whole lifetime (15+ years), you might want to buy the aircraft at some point.
You actually pay 1 month lease as delivery costs, so it's only ::) 6 and half years before lease will be more expensive. There is also possibility of selling the aircraft which obviously further shortens the time.
Insurance cover for leased aircraft is more expensive than owned aircraft. (Mandatory hull loss insurance that has no use at current point)
Thanks for all of the answers.. I guess if one is starting up an airline, where growth and getting to critical mass are important, then leasing is the only option.. Once big enough, purchasing an aircraft maybe a better option....
Another point on buying, is that the wait wait time on some aircraft is excruciatingly long, which is not an option for startup.
I never take out loans, I just buy the aircraft as it makes my airline look more successful by owning them
Also, owned aircraft can be leased out or sold if not needed. If you lease an aircraft you have to pay to terminate the lease.
If you purchase 40 aircraft you also get a nice 20% discount which you don't get with leasing.
If you have a good year and make a good profit you can get some of your tax back by spending money on buying planes.
And, sometimes you can make so much money in the game you just don't know what to do with it :)